...In this assignment I will be looking at the contents of the profit and loss account and I will be explaining the meanings and reasons for those contents. In addition I will be doing the same for the balance sheet. By law companies are expected to produce financial statements each year. These statements appear in Company Reports. There are two main financial statements: The profit and loss account: The profit and loss account is also known as a statement of profit and loss, an income statement or an income and expense statement. The profit and loss summarises on how much the business revenues are, their costs and expenses that has been sustained during a specific period of time which could usually be a quarter of year or a year. These summaries show how capable a business is to generate profits and handle costs. Sales are important in a business like monsoon because it shows you how well the business is doing. As monsoon is a business that sells items such as clothes, shoes, jewellery etc. The amount that they sell is important so that they can sell stock and receive some money that can be spread out for costs and expenditures it also enables the business know if they are doing better than other competitors looking at their volume of sales. Sales are also a big part in the profit and loss account statement and also help the balance sheet numbers as well. Cost Of sales is the accumulated total of all costs used to create a product or service, which has been sold. The cost of...
Words: 1106 - Pages: 5
...preparing a profit and loss account and balance sheet for Carrie’s Trophies Ltd, based on the information provided. Actual sales and purchases for the 12 months were as follows. | £ | £ | Sales/turnover | | 36,031.50 | Less cost of goods sold | | | Opening stock | 0 | | Purchase | 1602 | | Closing stock | 830 | | | | 2342 | Gross Profit | | 33,689.50 | Less expenses | | | Rent | 4800 | | Utilities | 720 | | Wages | 30000 | | Telephone | 3200 | | Distribution | 350 | | Advertising | 360 | | Insurance | 350 | | Packaging | 2119.50 | | Total expenses | | 36301.50 | Net profit before tax | | 4980 | What is a profit and loss account? Document that shows the historical record of income and expenditure made annually is known as profit and loss account. Why is it important to produce profit and loss accounts? It is important to produce profit and loss accounts because it helps the government to know what the business is earning so that they can impose them the correct tax. Which stakeholders are interested in the profit and loss account? Primary stakeholders are interested in the profit and loss account. Primary stakeholders are those stakeholders that engage in economic transactions with the business. Some of the examples are stockholders, customers, suppliers, creditors and employees. This can help the business to have proper documents that is useful to the company managers and CEO. Balance Sheet Assets...
Words: 428 - Pages: 2
...Balance Sheet - the information it provides | A typical balance sheet would look something like this. Balance Sheet of M/s Free Flow Fluids as on 30th June 2007 | Liabilities | Amount | Assets | Amount | Eq. Share Capital Pr. Share Capital Reserves and SurplusCapital Reserve General Reserve Share Premium Retained Earnings (P/L Appr.) Other ReservesLong Term Loans Fixed Deposits Collected Debentures Provisions for Taxation Provisions for Dividends Outstanding Expenses Pre-received Incomes Unclaimed Dividends Sundry Creditors Bills Payable Bank Overdraft | 35,00,000 12,00,000 6,00,000 12,00,000 3,50,000 43,50,000 4,00,00054,00,000 16,00,000 24,00,000 3,00,000 4,00,000 5,00,000 2,00,000 20,000 13,00,000 12,00,000 5,00,000 | Goodwill Land Buildings Plant and Machinery Furniture and Fittings Motor Vehicles Patents, Trade Marks, Copyrights Investments Stock of Raw Material Work in Progress Finished Goods Stock Prepaid Expenses Incomes Receivable Sundry Debtors Cash Bank Balance Loans and Advances Bills Receivable Deferred Revenue Expenditure Miscellaneous Expenses Discounts to be written off Accumulated Loss (P/L Appr. a/c debit balance) | 8,00,000 35,00,000 27,00,000 15,00,000 25,00,000 35,00,000 18,00,000 24,00,000 2,50,000 2,40,000 3,00,000 4,00,000 3,00,000 26,00,000 1,16,000 – 6,00,000 15,00,000 54,000 1,20,000 2,40,000 –...
Words: 31927 - Pages: 128
....................................................................... 3 Assets.................................................................................................................................. 3 Liabilities............................................................................................................................. 3 Owner’s Equity................................................................................................................... 3 The Balance Sheet .............................................................................................................. 5 Double Entry Bookkeeping............................................................................................... 6 Ledger Accounts................................................................................................................ 6 Trial Balance ...................................................................................................................... 7 Profit and Loss account.................................................................................................... 8 Sales.................................................................................................................................... 8 Cost of Sales ...................................................................................................................... 9 Expenses ..............................................................................................
Words: 1785 - Pages: 8
...------------------------------------------------- P5 - Interpret the contents of trading, profit and loss account and balance sheet for a selected company. In this assignment I will be interpreting the contents of the trading and profit loss account of Marks and Spencer’s and their balance sheet. I will then give my opinion on how well the might look to shareholders in the business. Scenario Marks and Spencer’s Finance Manager is attending the AGM set for the shareholders and other stakeholders next week. He has asked you to produce a presentation to address the stakeholders for Marks and Spencer’s. Why is a trading, profit and loss account important? A trading and profit loss account shows the how successful the business has been in terms of achieving their ultimate aim which is to make a profit. Most of the time the trading, profit and loss account of a business would tend to show the volume of revenue the business has received within the year of the trading, profit and loss account and the cost involved in generating that revenue. It is important as it allows them to compare their performance to previous years. This is also important because similarly to the balance sheet as it allows investors and shareholders to look at the businesses financial status and decide whether they would prefer to invest in the business. This puts added pressure on a business such as M&S because if they have failed in their objective of making a profit there is a high chance of them losing shareholders which could ultimately...
Words: 2459 - Pages: 10
...which this is presented depends upon the size of the business. However, for the moment it is sufficient to limit the discussion to the three key statements: The Profit and Loss Account The Balance Sheet The Cash Flow Statement End of Page 1 © Resource Development International Ltd. (RDI) 2009 Financial Statements The profit and loss account Page 2 of 13 The full name for the profit and loss account (P & L) is the 'trading, and profit and loss account' sometimes called the 'income statement' or the 'earnings statement' as in the USA. In this account the income for the period (usually one year) is compared with the expenditure for the same period which was involved in producing the income. The profit and loss account enables the owners of a business to answer the question: How much did we make? This is one measure of success (performance). Measuring profit (or loss), however, is a tricky business. Much depends upon which revenues and expenditures are relevant, i.e. which should be taken into account when measuring profit. Obviously profits can be increased by adding in more and more revenues, and leaving out certain expenditures. This is where Statements of Standard Accounting Practice (SSAP) and Financial Reporting Statements (FRS) come in. They guide the accountant so that, in theory at least, the profits of all companies are measured on the same basis. There are a number of tricks that an unscrupulous company might get up to if it wanted to appear to be more...
Words: 4821 - Pages: 20
...whatever they are making profit or making loss. The business which I will particular focus at will be ISIS. Also, this report will include the advantage and disadvantage of using a profit & loss and balance sheet; I will outline the purpose of accounting ratios, plus take in account of the advantages and the limitations of each ratio, I will be also judge on how well the business is doing, and finally, I will conclude this report and give out my recommendation. 2.0 Advantages & limitations of using a P&L and Balance sheet for ISIS 3.1 Profit and loss account A profit and loss account gives us an overview on how well or bad the business has done with their finance, it will also include a record of their profit and loss. To make it even clear, it is a financial statement that summarises the revenue, cost and expenses of the business during the financial year. If the business has made profits, they will remain the same on their trading performance or if they eager to make more profit, they have to try to figure out something new to bring the business to another level. However, if the business has a made a loss, they need to change their plans and try to get back the money they lost. The advantage of a profit and loss account is the purpose of it, like I mentioned, a useful tool for assessing the performance and expenditure of the business. A precise profit and loss statement can tell you whatever you’re losing money or making profit, this will then allow...
Words: 1607 - Pages: 7
...information summarized in the trial balance is used to produce financial statements of the business. Usually financial statements are drawn on an annual basis but they can be drawn up at any interval if need be. Financial statements can be presented in two formats: i. Vertical ii. Horizontal However, the vertical format is most commonly used in modern accounting and such it will be the standard we use. Key Terms Financial Statements: These are summary statements of results of a business’s activities for an accounting period and balances as at the end of that period. They include the profit and loss account and the balance sheet. Statement of Comprehensive Income (Profit and Loss Account): A summary statement that shows the results of activities (profit or loss) during the accounting period. Statement of Financial Position (Balance Sheet): This is a statement of balances of accounts, assets, liabilities and capital as at the end of an accounting period. Structure of Financial Statements Financial statements are structured financial presentations of the financial position of an entity as well as the results of its transactions. The main aim of financial statements is to provide information about an entity that is useful to users in making decisions. They provide information about the entity’s: a) Income and Expenses including gains and losses b) Assets c) Liabilities d) Capital The trial balance is the bridge between bookkeeping...
Words: 1025 - Pages: 5
...ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: CASE STUDIES THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF Bachelor of Technology in Mining Engineering By SUDIP DAS Roll: 10605038 DEPARTMENT OF MINING ENGINEERING NATIONAL INSTITUTE OF TECHNOLOGY, ROURKELA 2010 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: CASE STUDIES THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF Bachelor of Technology in Mining Engineering By SUDIP DAS Roll: 10605038 Under the guidance of Prof. D.P.TRIPATHY DEPARTMENT OF MINING ENGINEERING NATIONAL INSTITUTE OF TECHNOLOGY, ROURKELA 2010 National Institute of Technology Rourkela CERTIFICATE This is to certify that the thesis entitled “ANALYSIS AND INTERPRETATION FINANCIAL STATEMENTS: CASE STUDIES” submitted by Sri Sudip Das, Roll No: 10605038 in partial fulfillment of the requirements for the award of Bachelor of Technology degree in Mining Engineering at the National Institute of Technology, Rourkela (Deemed University) is an authentic work carried out by him under my supervision and guidance. To the best of my knowledge, the matter embodied in the thesis has not been submitted to any other University/Institute for the award of any Degree or Diploma. Date: (Prof. D.P. TRIPATHY) Dept. of Mining Engineering National Institute of Technology Rourkela-769008 ACKNOWLEDGEMENT I wish to express my deep sense of gratitude and indebtedness...
Words: 21095 - Pages: 85
...ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: CASE STUDIES THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF Bachelor of Technology in Mining Engineering By SUDIP DAS Roll: 10605038 DEPARTMENT OF MINING ENGINEERING NATIONAL INSTITUTE OF TECHNOLOGY, ROURKELA 2010 ANALYSIS AND INTERPRETATION OF FINANCIAL STATEMENTS: CASE STUDIES THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF Bachelor of Technology in Mining Engineering By SUDIP DAS Roll: 10605038 Under the guidance of Prof. D.P.TRIPATHY DEPARTMENT OF MINING ENGINEERING NATIONAL INSTITUTE OF TECHNOLOGY, ROURKELA 2010 National Institute of Technology Rourkela CERTIFICATE This is to certify that the thesis entitled “ANALYSIS AND INTERPRETATION FINANCIAL STATEMENTS: CASE STUDIES” submitted by Sri Sudip Das, Roll No: 10605038 in partial fulfillment of the requirements for the award of Bachelor of Technology degree in Mining Engineering at the National Institute of Technology, Rourkela (Deemed University) is an authentic work carried out by him under my supervision and guidance. To the best of my knowledge, the matter embodied in the thesis has not been submitted to any other University/Institute for the award of any Degree or Diploma. Date: (Prof. D.P. TRIPATHY) Dept. of Mining Engineering National Institute of Technology Rourkela-769008 ACKNOWLEDGEMENT I wish to express my deep sense of gratitude and indebtedness to Dr. D.P.Tripathy, Department of...
Words: 21095 - Pages: 85
...that the Balance Sheet and the Income Statement provide complementary but different information.” In financial accounting, the Balance Sheet and the Income Statement are two of the most important financial documents for a company. Primarily, a Balance Sheet is a summary of the financial balances within a company: it documents all of the company’s liabilities, ownership equity and assets at a certain moment (a “snapshot”) in time within the business’ calendar year. An Income Statement however documents income (revenue) and expenses over particular period which can be done quarterly or at the end of the financial year. Ultimately, although the Income Statement and the Balance Sheet are closely related and therefore complement each other, the information documented in each is so different that they are not substitutable. I will be using the 2012 Annual Report of Fenner plc, FTSE250 manufacturing company, along with accounting policies and theory to highlight how the two financial statements provide complementary but different information. Moreover, I will briefly compare a TEVA Pharmaceuticals Ltd Q2 2013 quarterly report to highlight differences between information shown annually and quarterly. I will provide a link to the .pdf version of the annual reports in my appendix, while all the “Exhibits” will be excerpts from the reports. Firstly it is important to know in detail the role each financial statement has. The purpose of the Income Statement, or profit and loss account...
Words: 1840 - Pages: 8
...Though a balance sheet is not formally required for most small business reports or even taxes, it can be helpful in determining the overall health of a company. Without an understanding of basic accounting principles, it may be overwhelming to think of creating a balance sheet or any other financial report. However, balance sheets can be quite simple for a small business owner to create and can even be generated automatically by most online or traditional accounting software. Ads by Google QuickBooks™ P&L Statement Create Profit and Loss Templates Quickly & Easily. Try Free Today!www.intuit.co.uk/SelfEmployed Business Snapshot As a small business owner, you may turn to either your balance sheet or profit and loss statement to understand how your business is doing financially. Whereas your profit and loss statement can quickly show your expenses versus your income, it doesn't specify your current assets and pending liabilities like a balance sheet does. While many other financial reports simply show you transactions that have already occurred, a balance sheet gives you an idea of things that need to occur soon. If you've just made a huge sale, your profit and loss statement may show your "business health" as great, whereas your balance sheet would also show the huge bill you owe a vendor within the next 30 days. It is a more accurate picture of your business's status. Investors and Loans Your balance sheet is an ever-changing document on which...
Words: 470 - Pages: 2
...show the profit or loss of the business and the financial position of the business and it will help in decision-making. ▪ The accounting equation shows that the assets are always equal to the capital plus the liabilities of the business. Assets = Capital + Liabilities ▪ A balance sheet is a statement of the financial position of a business and a certain date. Chapter: 2 Double Entry Bookkeeping- Part A ▪ Every transaction must be entered twice-on the debit side of one accounting and on the credit side of another account. ▪ The debit entry is made in the account which is receiving the value and the credit entry is made in the account which is giving the value. ▪ Each type of asset, liability, expense and income has its own ledger account. ▪ Any value taken from the business by the owner of the business is known as drawings. ▪ At the end of the period, the accounts of assets and liabilities which contain more than one entry should be balanced. ▪ The entries for purchases and sales and purchases returns and sales returns are recorded in separate accounts. ▪ Carriage is the cost of transporting goods. Chapter: 3 Trial balance ▪ A trial balance is a list of the balance on the accounts in the ledger at a certain date. ▪ A trial balance is prepared to check the arithmetical accuracy of the double entry bookkeeping. ▪ If a trial balance fails to balance, it indicates...
Words: 3733 - Pages: 15
...SCHEDULE VI Every company registered under the Act shall prepare its Balance Sheet, Statement of Profit and Loss and notes thereto in accordance with the manner prescribed in Schedule VI to the Companies Act, 1956. To harmonise the disclosure requirements with the Accounting Standards and to converge with the new reforms, the Ministry of Corporate Affairs vide Notification No. S.O. 447(E), dated 28th February 2011 replaced the existing Schedule VI of the Companies Act, 1956 with the revised one. Government vide Notification No. F.N. 2/6/2008 – C.L-V dated 30th March 2011 made the revised Schedule VI applicable to all companies for the financial year commencing from 01st April 2011. The requirements of the Revised Schedule VI however, do not apply to companies as referred to in the proviso to Section 211 (1) and Section 211 (2) of the Act, i.e., any insurance or banking company, or any company engaged in the generation or supply of electricity or to any other class of company for which a form of Balance Sheet and Profit and Loss account has been specified in or under any other Act governing such class of company. Key Features of Revised Schedule VI –Balance Sheet • The revised schedule contains General Instructions, Part I – Form of Balance Sheet; General Instructions for Preparation of Balance Sheet, Part II – Form of Statement of Profit and Loss; General Instructions for Preparation of Statement of Profit and Loss. • The Revised Schedule VI has eliminated the concept of ‘schedule’...
Words: 6818 - Pages: 28
...financial statement and that is a balance sheet, a profit and loss statement, a statement of a change in equity, and a statement of cash flow. These four types of a financial statement have their own purpose in the accounting field and they are all very important to the businesses and individual people that use each of them. The balance sheet lets the businesses and people that use this sheet know what assets, liabilities, and ownership equity at anytime they need it, monthly, quarterly, or yearly. The balance sheet is also a summary of a sole proprietorship, business partnership, and other business organizations, if companies and businesses need them depending on if there is an audit of the company or needing them for month end or yearly end purposes. A balance sheet usually has assets in one section of the statement and liabilities and net worth in the other section. There are two types of a balance sheet and that is an account form and a report form. The balance sheet for personal use has current assets such as cash flow whether is would be in the checking account and or in a savings account or liabilities such as mortgages, and other debits that go through the account. The profit and loss part of the financial statement is the report of the companies income, expenses, and profits over a period of time. This statement also shows the depreciation and write-offs that occurred which shows losses on the report. Also the profit and loss statement shows what losses occurred...
Words: 1060 - Pages: 5
